the bearer without investigating his title unless the debenture contains a receipt clause applicable to the coupons. note. But a coupon similar to Form 2 is a promissory note, and When coupon consequently possesses all the incidents of a negotiable instru- a promissory ment, e.g., it passes by delivery, and the holder for the time being can sue on it free from equities. Hence any person can safely purchase, discount, or otherwise deal with the coupon without inquiry, and the company may safely pay the bearer. See supra, p. 386, as to the incidents of a negotiable instru ment. It would seem that coupons in Form 2 are possessed of con- Advantages siderable advantages over those in Form 1. But until recently of Form 2. Form 1 only has been in use in England. Both forms are used in the United States: Thompson v. Lee County, 3 Wallace, 421; Haven v. Grand Junction, &c., Ry. Co., 109, Mass. 88; and there seems no reason why coupons in Form 2 should not in many cases be used here. Even where the debenture itself is not to bearer, it will save trouble and facilitate the payment of interest if the coupons are in Form 2. If desired they can be made "to order," but for the same reasons which are mentioned, infra, p. 426, as rendering it undesirable to make debentures to order, it seems inexpedient to make coupons to order. Of course Form 2 can only be adopted when the company has power to issue promissory notes. See supra, p. 106; but most of the companies that issue debentures can do this. With regard to the execution of coupons in Form 2 the directors will authorise one or more of their body to execute. If thought fit the name of the executing director can be As to stampsigned by means of a stamp. "I see no distinction between ing signature. using a pen or a pencil and using a stamp, where the impression is put upon the paper by the proper hand of the party signing." Per Bovill, C. J., Bennett v. Brumfitt, L. R. 3 C. P. 31. The law in the United States is the same. Pennington v. Bachr, 48 Cal. 565. The Stamp Act, 1870 (see Schedule) imposes the following Stamps. duties on a mortgage, bond, debenture, or covenant : (1.) Being the only, or principal, or primary security for the payment or repayment of money not exceeding 251. . 0 0 8 Debenture Promissory note. For every 1007. and also any fractional part of 1007. of such amount (2.) Being a collateral, or auxiliary, or additional, or substituted security, or by way of further assurance for the above-mentioned purpose where the principal or primary security is duly stamped: For every 1007., and also for any fractional part of 1007. of the amount secured Under the same Act a promissory note is liable to the following duty : : Where the amount or value of the money for which the bill or note is drawn or made does not exceed 51. . 0 2 6 . 0 0 6 0 0 1 002 For every 1007. and also for any fractional part of 0 1 0 If, therefore, a debenture is intended to operate as a promissory note, it should be stamped accordingly, but in other cases it will be stamped as a debenture. Section 9 of the Stamp Act, 1870, provides as follows:(1.) A stamp which by any word or words on the face of it. is appropriated to any particular description of instrument is not to be used, or, if used, is not to be available for an instrument of any other description. (2.) An instrument falling under the particular description to which any stamp is so appropriated as aforesaid, is not to be deemed duly stamped, unless it is stamped with a stamp so appropriated. Section 53 is as follows: 1. Where a bill of exchange or promissory note has been written on material bearing an impressed stamp of sufficient amount, but of improper denomination, it may be stamped with the proper stamp on payment of the duty, and a penalty of forty shillings if the bill or note be not then payable according to its tenor, and of ten pounds if the same be so payable. (2.) Except as aforesaid, no bill of exchange or promissory note shall be stamped with an impressed stamp after the execution thereof. A coupon or warrant for interest attached to or issued with Coupon. any security is exempted from stamp duty by the Stamp Act, 1870. See Schedule, under title, "Bill of Exchange" Exemptions. If, however, the coupon is in effect a promissory note (see supra, p. 421), it might perhaps be contended that it ought to be stamped accordingly. Possibly the exemption would be held to apply only to such coupons as in Enthoven v. Hoyle, 16 Jur. 272; 21 L. J., C. P. 100; 13 C. P. 373; see supra, p. 420. Under the circumstances it would seem to be expedient, where coupons in Form 2 (supra, p. 420) are used, to stamp them as promissory notes; the expense is small, and subsequent difficulties may thereby be obviated. Forms. DEBENTURES. FORM I. DEBENTURE to BEARER, INTENDED to OPERATE as Incorporated under the Companies Acts, 1862 and 1867. Capital, £ No. Office, Debenture [1007.]: The Company, Limited, will, on the day of 18-, pay to the bearer (b) of this debenture at the Bank, No.-, Street, in the City of London, or at the registered office of the company, the sum of [1007.] (c). And the said company will also pay to the bearer (d) of this debenture interest at the rate of 6 per cent. per annum on the said sum of [1007.], by equal half-yearly payments, on the 1st day of November and 1st day of May in each year, upon presentation and delivery of the coupons hereto annexed, the first of such half-yearly payments to be made on the 1st day of November, 1877. IN WITNESS whereof the company hath caused two of its directors to set their hands hereto this day of Forms. (a) As to the heading of a debenture :-Very commonly the above heading is used. Sometimes several of the particulars are omitted, and occasionally words showing that the debenture belongs to a particular Heading of issue are inserted, e.g., "Issue of 20,0007. in 2,000 debentures, of 1007. each, 1877." See, also, in the case of mortgage debentures, infra, Forms 7 & 8, and Schedule 4 to Form 10. (b) The above debenture is intended to operate as a promissory note and should be stamped accordingly. See further, supra, p. 387, et seq. Until it has been decided that a company can make a promissory note under its seal (supra, pp. 387, 390), it seems expedient, where it is desired to issue debentures which will certainly be negotiable, to have them signed on behalf of the company, as above, instead of being "given under the common seal." See supra, p. 390. As a debenture in the above form will be legally negotiable, there is, of course, no need to provide that it shall be assignable free from equities, or that the receipt of the bearer shall be a good discharge, for these are incidents of a promissory note to bearer. See further, supra, p. 386. A debenture so executed, will be binding on the company, assuming that it has power to issue negotiable instruments (see supra, p. 106) under Section 47 of the Act, and also under the Act of 1867, see supra, p. 15, provided, of course, that the Board authorises the execution. See further, supra, p. 16. debentures. Why debenture signed for company. (c) It is not essential to express the consideration in a debenture, but Consideration. if in any case it is deemed desirable to do so the instrument will commence as follows: "In consideration of the sum of 7. paid to the above-named company (or to the Company, Limited), by said company will, &c.; " or, "The sideration of 7., paid to it by of of the Company, Limited, in conwill, &c." (d) The following form is frequently used instead of the above. "And the said company will also pay to the bearer of every interest coupon hereto annexed, at the time and place in such coupon mentioned, such sum as in such coupon is specified." See In re Blakely Ordnance Co., 3 Ch. 154. (e) It is, perhaps, needless to say that directors signing an instrument Directors "for "a company as above, could not be held personally liable. Lindus signing not v. Melrose, 3 H. & N. 177; 27 L. J. Ex. 326; Dutton v. Marsh, L. R. personally Q. B. 364; Aggs v. Nicholson, 1 H. & N. 165; 25 L. J. Ex. 348, and cases cited, supra, p. 17. (f) As to affixing the seal : Debentures are generally sealed with the common seal of the company issuing them, and it may be considered that the absence of the seal from such an instrument would be objectionable, especially as the notion that a company can only contract under seal is more or less prevalent. In order to meet this objection, it would seem expedient to affix the seal of the company to a debenture framed and executed as above. There can be little or no doubt that the addition of the seal would not deprive the instrument of the character of a promissory note. It is well settled that the affixing of a seal to a contract does not make it a deed if it appears that it was not intended to operate as a deed. Thus where a contract concluded with the words, "To which the parties have set their hands" (not hands and seals), it was held not to be a deed, although seals were set opposite the signatures. Chambre, J., said that liable. |